The Modi government has announced a cut in the import duty on gold and silver, a move welcomed by the industry as it will bring down prices of precious metals in the domestic market and boost exports of gems and jewellery. Finance Minister Nirmala Sitharaman in her budget speech said that to bring the prices of precious metals closer to previous levels, the government will rationalise customs duty on gold and silver.
Gold and silver presently attract a basic customs duty of 12.5 per cent. Since the duty was raised from 10 per cent in July 2019, prices of precious metals have risen sharply. But the government in the Budget cut the customs duty on gold and silver to 7.5 per cent while duties on other precious metals were cut down to 6.9 per cent on gold dore bar from 11.85 per cent; 6.1 per cent on silver dore bar from 11 per cent; 10 per cent on platinum from 12.5 per cent; 10 per cent for gold/silver findings from 20 per cent; and 10 per cent on precious metal coins from 12.5 per cent.
All these sectors, however, would also attract 'Agriculture Infrastructure and Development Cess' at the rate of 2.5 per cent.
Welcoming the decision, Gems and Jewellery Export Promotion Council (GJEPC) Chairman Colin Shah said that it would help in promoting domestic manufacturing and boosting exports. "It was our long pending demand to cut the import duty on gold and silver. It is a welcome move for the domestic organised sector," he said.
Vastupal Ranka of Gem & Jewellery Trade Council of India said that the Budget 2021 is favourable for the industry and the industry players are happy that not extra duties or taxes are levied.
"The budget proves good for exporters as prices in the international markets come down making India more competitive in the global market. As expected, the customs duty on gold and silver have been reduced by 2.5% - from 10% to 7.5%. Gold Dore bars and Silver Dore bars will respectively attract customs duty of 6.9% and 6.1%, compared to the existing rates as well. These three items will also attract Agriculture Infrastructure and Development Cess at the rate of 2.5 per cent. All these provisions are encouraging and highly beneficial to the sector as it boosts growth, investment and capital," Ranka said.
Saurabh Khandelwal, Owner of Dhanvi Diamond, said that custom duty revision has already seen the effect in the afternoon session on the day of Budget. He said that more effects on the prices of gold will be visible in the coming days.
"This spurs the demand for gold in the market. NRIs who buy gold outside India will also find Indian gold industry attractive and begin to buy more in the coming times with this budget. We definitely expect a boost in sales as the domestic market will improve and, people will be more motivated to invest in gold and purchase gold for festivals and occasions," Saurabh said.
India is the largest importer of gold, which mainly caters to demand of the jewellery industry. In volume terms, the country imports 800-900 tonnes of gold annually. Gems and jewellery exports declined by about 40 per cent to about USD 17 billion during the nine months of the current fiscal.